Many companies lack a focused strategy for managing accounts receivables (AR). Without looking for ways to improve the whole process, businesses are likely missing out on opportunities to accelerate deposit gathering and operating cost reduction. The cost of these inefficiencies adds up.
Evaluating your current practices and developing a strategic plan around receivables management can help drive efficiencies and boost your bottom line.
Why focus on improving receivables management?
Businesses tend to overlook the opportunities presented by having a focused receivables process strategy. Paying attention to new payment methods and customer preferences allows you to expedite deposits, enabling your business to reduce interest expenses if you’re in a borrowing position or generate interest revenue through additional investments if you’re in a liquid position.
On the other hand, ignoring your receivables process or continuing to manage deposits the way you always have could result in higher operating and interest expenses.
Consider the value to your company of being paid faster and turning those funds into further lines of credit or investment opportunities. Creating a more efficient receivables management process can help you realize that value.
Expediate payments through new technology and automation
Payment technology is constantly changing, so it is important to pay attention to what’s available. There are traditional methods such as checks or Automated Clearing House (ACH), which your business might currently rely on to gather deposits, but there are also newer methods like PayPal® and Real Time Payments (RTP).
In addition to alternate payment methods, there have also been advancements in technology that offer numerous benefits. Many of these solutions focus on improving the entire receivables process, including invoicing and integrating finance systems. One option, eBill Present & Pay (EBPP), can deliver invoices electronically – lowering costs related to manual work – and includes built-in payment options. Implementing a new payment collection model or invoicing system with tie-in payment options like this can help automate steps in the receivables process, reducing costs and increasing efficiencies.
These deposit collection methods and new technology solutions could also result in fewer days sales outstanding (DSO). Embracing automation and accepting new methods for gathering funds can dramatically improve payment speed for businesses.
Increase efficiencies by improving the customer experience
As payment methods evolve, so do payment preferences. What worked at one point in time – mailing invoices and receiving paper checks in return – might not be the best fit for your customers today.
While companies might not lose business if they don’t accept alternate payment methods, the slower process could frustrate customers. Connecting your billing and invoicing system to additional payment methods can lead to a more efficient invoicing process that can support your customer’s payment preferences. Allowing customers flexibility to pay in their preferred method results in a much more positive customer service experience.
Understanding where customers are located, how they prefer to pay, and what billing and payment alternatives are available can also lead to more accurate and timely invoicing, payment processing, and payment posting.
Customers appreciate being able to choose what’s right for them while your business benefits from streamlined receivables management.
Review your accounts receivable management process to uncover opportunities
It’s easy to focus only on the task at hand and maintain processes because it’s how you have always done it. Identifying opportunities for improvement begins with a review of your current receivables process.
Steps to consider:
- Assess the full cost of your process.
- Evaluate personnel and operating costs for invoicing and posting.
- Identify legacy or outdated processes that could be slowing you down.
- Outline payment methods, costs, and timing.
- Pay attention to best practices for your industry.
Take the time to assess your current process by following the steps above to ensure your business has an efficient, secure, low-risk receivables process in place. Understand your costs, pay attention to how your peers are handling receivables, and continuously look for opportunities to improve further.
Working with a trusted banker is a great place to start to understand the payment environment as well as what solutions would work best for your business.
